Oil and gas investment set to rise

Friday 6 September 2013

Companies in the oil and gas sector are feeling confident about the future and looking to boost their investment over the course of 2013, according to new research from Barclays.

Spending on exploration and production (E&P) is set to rise by ten per cent over 2013 compared to last year, the bank revealed in its latest Global E&P Spending Update, indicating that the search for new resources and the desire to boost output will keep contractors and permanent staff in the industry busy for some years to come.

Demand still by far outweighs supply around the world, the report says, which is likely to keep prices at relatively high levels. As a result, companies are continually hoping to find extra reserves in more remote places - and technological developments are increasing the potential to extract oil from previously difficult locations. This means that companies are likely to find themselves ploughing more resources into new projects around the world, in turn creating demand for the specialist skills of freelance talent.

Spending growth is expected to slow down in Latin America in the near future, but Barclays also says this will be compensated by budget rises in countries as diverse as India, Australia and states in the Middle East.

More than three out of five companies predicted that their budgets would increase over the next five years, while another seven out of ten respondents said that oil prices would rise in the coming half-decade. Some even suggested the commodity could sell for as much as $120 per barrel in five years’ time.

“We do believe the industry in the early stages of a strong, sustained upcycle,” Barclays analyst James West told Reuters in a conference call.

Significantly, Rigzone reports that this worldwide growth is likely to show in the UK oil and gas industry, with respondents claiming that they planned to hire up to 23,000 more staff in the next five years - a fact which is likely to mean that oil and gas contractors will see more opportunities on home shores as well.

“There is clearly a desire to add a high number of skilled staff to the North Sea workforce and drive forward the planned activity over the coming decades,” says Walter Cumming, head of oil and gas at Barclays Corporate Banking.

The UK government has launched a number of initiatives to attract investment to the UK’s energy sector. Earlier this year, it was announced that investment had hit record levels thanks to the tax breaks and other incentives that the government has sought to provide. Just this week, chancellor George Osborne said that politicians would be entering into legally binding contracts with oil companies to guarantee the level of tax breaks that will be available to them in the future when they begin decommissioning their projects.

“Spending has been targeted not only at maximising the output from the region’s mature fields, but also at unlocking new discoveries such as those in the waters west of Shetland,” Mr Cummings adds. “It’s becoming increasingly clear that plans are being drawn up to ensure exploration and production (E&P) activity continues for decades to come.”

By Victoria McDonnell

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